Business Legal News from Blackadders Solicitors

The UK’s highest court passes two landmark rulings on age discrimination.  In the first case, the Supreme Court rejected an appeal by the former senior partner of a law firm that he was forced to retire at 65.  The firm relied on its partnership agreement which required partners to retire at 65, justifying this as necessary for succession planning, allowing promotion opportunities for younger solicitors.

The claimant ceased to be a partner on 31 December 2006.  He brought a claim alleging, under the Age Regulations (which have since been repealed but substantially re-enacted under the Equality Act 2010) that his forced retirement was an act of direct age discrimination.  There was no dispute that the compulsory retirement age was direct age discrimination.  The issue was whether it could be justified as a proportionate means of achieving a legitimate aim.  The employment tribunal considered so and dismissed the case.  Mr Seldon appealed the case all the way to the Supreme Court.  The Supreme Court held that the law firm was entitled to set its own retirement age and considered that its objectives of allowing promotion opportunities for younger solicitors by succession planning were legitimate.

The influential judgment will be welcomed by employers looking at whether they can set their own retirement ages at a time when many older workers delay retirement because of shrinking pensions.  However, the judgment still leaves open the big question of whether 65 (or any other age) would be a justifiable retirement age across the board.  Whilst in Mr Seldon’s case, the firm may have been justified setting a retirement age for positions at the top of the firm on the grounds of succession planning, the Court would probably have come to a different conclusion if Mr Seldon had been a junior employee in a sedentary role.  Employers will have to consider the specific factors of each case.

A second highly significant age discrimination judgement was also published on 25 April.  The claimant, a former policeman who worked as a legal adviser for the Police National Legal Database, claimed that he was indirectly discriminated against because of new rules that employees needed a law degree to get on the highest pay grade.  The claimant was aged 62 at the time and had been due to retire at 65 making it impossible for him to gain any increase in pay from the degree before he retired.  The Supreme Court held that the pay rules constituted indirect discrimination.  The question of whether they were objectively justified was remitted back to the employment tribunal.  The case highlights a need to review benefits offered taking into account their value for older workers compared with younger workers.

Cases referred to: Seldon (Appellant) v Clarkson Wright and Jakes (A Partnership) (Respondent) and Homer (Appellant) 2012 v Chief Constable of West Yorkshire Police (Respondent) 2012

Judgements at http://www.supremecourt.gov.uk/decided-cases/index.html

In an effort to move towards a more common sense approach to health and safety law, the UK Government has announced changes to the accident reporting regime. These changes were implemented following recommendations made by Lord Young in his report “Common Sense, Common Safety”. The changes are effected by the Reporting of Injuries, Diseases and Dangerous Occurrences (Amendment) Regulations 2012 which came into force on 6 April 2012.

Under the previous system, employers were obliged to report to the Health and Safety Executive (HSE) any injuries at work which resulted in the worker being absent from normal duties for more than three consecutive days. Under the new system, employers are only obliged to report injuries to the HSE when the worker is incapacitated for seven or more consecutive days (not including the day of the accident). Incapacitation means that the worker must be absent or unable to do work that they would reasonably be expected to do as part of their normal duties.

The change will align the reporting system with the current ‘fit note’ system which requires someone who is absent from work because they suffered a reportable injury to provide a medical assessment. Ministers claim that the change will reduce the number of incidents which must be reported by around 30% which will in turn save business an estimated 10,000 hours per year.

Employment Minister Chris Grayling stated “We want less red tape for business… We are freeing them from the burdens of unnecessary bureaucracy, while making sure serious incidents are properly investigated”. According to Judith Hackitt, Chair of the HSE “The change to the RIDDOR regulations will cut paperwork, help employers manage sickness absence and ensure that the reporting system is focused on risks which have resulted in more serious injury”.

A further change is that the timescale within which employers must report such an accident to the HSE is extended from 10 to 15 days. Employers are responsible for keeping a record of all injuries resulting in more than three days of absence.

This requirement remains unchanged and it is therefore still important for employers to log such injuries in some form of accident book.

When is there a need to collectively consult? 

Where an employer proposes to make 20 or more employees redundant within a period of 90 days or less, it must consult on its proposal with representatives of the affected employees. 

When should such collective consultation commence? 

The legislation states that this obligation to consult must begin “in good time.”  The Advocate General recently provided some guidance as to the meaning of this legislation. 

What were the circumstances surrounding the Advocate General’s recent guidance?

Ms Nolan was employed at a military base in Southampton.  A decision to close the base was communicated by the Secretary of the US Army on 13 March 2006.  This decision was reported by the British media on 21 April 2006.  The commanding officer of the base apologised to Ms Nolan and others at a meeting on 24 April 2006 for the way in which the news about the closure had been made public.  The US authorities advised the workforce representatives on 14 June 2006 that the starting date for the consultations had been 5 June 2006. 

What was the question put to the Advocate General? 

Does the employer’s obligation to consult about collective redundancies arise:

1. when the employer is proposing, but has not yet made, a strategic business or operational decision that will foreseeably or inevitably lead to collective redundancies; or
2. only when that decision has actually been made and the employer is then proposing the consequential redundancies? 

What was the Advocate General’s response?

Neither.  The Advocate General has stated that an employer’s duty to conduct consultations with the workers’ representatives arises when a strategic or commercial decision which compels it to contemplate or to plan for collective redundancies is made by a body or entity which controls the employer. 

Does this recent guidance assist employers in understanding the legislation?

In Ms Nolan’s case, the decision to close the base was made by a separate entity from the direct employer which slightly limits the usefulness of this guidance for employers who are not governed in this way.  However arguably this does suggest that employers do not require to consult with the workforce when reaching the commercial decision as to whether to close the business and, instead, the requirement to consult only commences after this decision has been reached. 

Nevertheless this guidance does indirectly reinforce the requirement for an employer to meaningfully consult with its workforce during a redundancy process.

In an effort to promote business growth and encourage smaller employers to take on new employees, the Government has proposed changes to the rules of the Employment Tribunal system. In early October 2011 George Osborne, Chancellor of Exchequer announced the Government’s plan to increase the qualifying period in unfair dismissal claims from one year to two years.

In February 2012 a draft of the Unfair Dismissal and Statement of Reasons for Dismissal (Variation of Qualifying Period) Order 2012 was released. The effect of this legislation will impact on all employees who commence employment on or after 6 April 2012. For such employees the qualifying period of continuous employment for unfair dismissal claims will increase from one year to two years. Any employees whose period of continuous employment commenced on or prior to 5 April 2012 will be subject the old one year qualifying period.

There has been mixed reaction to this. The Government hopes that the number of unfair dismissal claims will decrease by approximately 2000 per year and that this will save businesses an estimated £6 million per year. Employees with less two years’ continuous service will be more vulnerable to dismissal without the employer following the appropriate procedure. Some fear that the change will result in a ‘hire and fire’ culture.

The change will no doubt result in an increased number of employees attempting to shoehorn unfair dismissal claims into discrimination or whistleblowing jurisdictions where there is no qualifying service requirement. For diligent employers who make use of probationary periods and dismiss poor performers relatively quickly the change might not make much difference. However, the increase in the qualifying period certainly allows more time within which an employer can assess new employees before deciding whether or not to retain them. The change might also act as an incentive for employers to select employees with less than two years’ service for redundancy ahead of those with longer service whose dismissal would be more costly because of the need to make statutory redundancy payments (but employers will still need to be careful to avoid age discrimination towards younger employees who are more likely to have shorter service).

A further change which came into force on 15 February 2012 is an increase to the maximum employment tribunal deposit order from £500 to £1000. If an employment judge considers that a claim has no reasonable prospect of success, the tribunal rules of procedure allow the judge to order the party concerned to pay a deposit. This is essentially a payment to allow that party to proceed with the case. If the claim is not successful, the deposit is not refunded.

There is a further significant change on the horizon. The Government is currently consulting on proposals to introduce a fee structure into the Employment Tribunal system. The proposals are aimed at encouraging early resolution of workplace disputes and shifting some of the costs associated with the system from the taxpayer to those who use the service.

Bringing a claim is currently free of charge. This is different from the position with ordinary court actions which involve a lodging fee (and further fees at each stage of the procedure). The consultation is seeking opinions on two separate charging options but makes it clear that the concept of fees being introduced is not up for discussion. The first option involves payment of an initial fee at the point when a claim is lodged (the amount of which will depend upon the nature of the claim and would be between £150 and £250). Option 1 would also involve a second charging point shortly in advance of the hearing (again the level of fee would be based on a sliding scale depending upon the nature of the claim from £250 to £1,250). The second option involves one main fee to be paid by the claimant at the time a claim is lodged irrespective of whether the claim progresses to a hearing. This fee would depend upon the nature and value of the claim and could range from £200 to £1,750. The second option would also involve a higher level of fee for those seeking to recover in excess of £30,000. Both options allow for the successful party to recover any fees paid from the unsuccessful party. The consultation period closes on 6 March 2012. Fees will not be introduced before 2013-14 so watch this space.

In accordance with the Working Time Regulations 1998 (WTR), workers are entitled to 5.6 weeks’ paid annual leave in each leave year.  This is relatively straightforward concept in relation to a typical 9 till 5 worker who works 5 days each week throughout the whole year, with a few weeks taken from that commitment for annual holidays.  However, this is by no means a uniform working pattern.  What about workers with a less regular working pattern?  The underlying principle behind the European legislation which the WTR implements is that in the interests of health and safety, workers should be given time off to rest.

A recent decision of the Supreme Court has offered some guidance on the issue of holiday entitlement for workers with atypical working patterns.  This case related to a group of offshore workers in the oil and gas industry.  The workers generally followed a pattern of working two weeks offshore (where they would carry out twelve hour shifts followed by a twelve hour rest) and two weeks onshore when they were not contractually obliged to carry out work but might attend occasional appraisals or training.

The workers raised claims that they had been denied their statutory entitlement to 4 weeks’ annual leave (the cases were raised before the statutory entitlement increased to 5.6 weeks). The employer resisted the claims on the basis that the 26 or more weeks the claimants spent onshore on “field breaks” was more than sufficient to encompass their statutory annual leave entitlement.  The workers argued that the proper interpretation of ‘annual leave’ meant release from what would have been an obligation to work, and that as a result they ought to have been permitted to take annual leave during periods when they would have been offshore.

The initial claims were successful at the Employment Tribunal.  However, these were overturned by the Employment Appeal Tribunal (EAT). The Court of Session did not interfere with the decision of the EAT, prompting the workers to appeal the case further to the Supreme Court.  The Supreme Court agreed with the employers and refused the appeals.  The reasoning given by Lord Hope was that under the European legislation providing for entitlement to rest periods, ‘rest period’ simply means any period which is not working time, irrespective of where the worker is and what he is doing.  Accordingly, the rest periods which were onshore field breaks fell within this category and the workers were not entitled to take their annual leave entitlement as time off from offshore work. 

The decision has practical implications for other workers with irregular patterns of work.  For example, teachers who are allowed holidays which match the school holidays could not insist on having part of their annual leave during term time (unless their contract of employment provided for additional periods of contractual annual leave).

It is understandable that the government wants to reduce the cost of the employment tribunal system. On the other hand employers and employees who use the system want it to be as efficient and user friendly as possible. It is by no means certain that the latest reforms will successfully reconcile these objectives.

The length of the qualifying period for claiming unfair dismissal has been a political pendulum since the right to claim was introduced in 1971. It has been two years before, and as little as six months. While the increase to two years will reduce the number of unfair dismissal claims employers should arguably not take as long as two years to identify underperforming employees.

The proposed introduction of fees for tribunal claimants from 2013 which the Chancellor announced last month is not entirely consistent with the concept of easy access to justice which the employment tribunal system was originally intended to provide. It would be an easy step for this to be extended to fees for employers who have to resist tribunal claims, and so employers should perhaps be cautious in welcoming this. There must also be a concern about whether the system of fees would be cost effective to manage.

The idea of early conciliation requiring all potential claimants to submit their claims to ACAS before coming to an employment tribunal is fine in theory but it will only work effectively if ACAS have adequate resources to deal with potential claims promptly and efficiently.

The proposal for “protected conversations” allowing employers to have frank discussions about poor performance with employees without the fear that they can be used as evidence in an employment tribunal seems an unnecessary complication. Employers should not be afraid to tell employees when they are underperforming and it is not clear why that conversation needs to be “protected”.

The call for evidence on the length of time required for consultation on proposed redundancies (with a view to reducing the period from 90 days in some cases to 30 days) feels like shutting the stable door after the horse has bolted, unless of course the government is taking a very pessimistic view on future growth and employment prospects.

The government are right to recognise that the best way to reduce the burden on the employment tribunal system is to resolve disputes within the workplace. It remains to be seen whether their proposals to encourage workplace mediation and to simplify and promote the use of compromise agreements will a achieve this.

Next year will be a milestone for the Queen.  The first week of June 2012 will mark the 60^th year of Queen Elizabeth’s reign as monarch.  She will be only the second British monarch to reign for that duration, Queen Victoria also having reached the 60 year milestone previously.  Lord Mandelson commented that this would be a “remarkable achievement” when announcing that an extra bank holiday would be granted to mark the celebration of the Diamond Jubilee on 5 June 2012.

Whilst the Diamond Jubilee will undoubtedly be a notable celebration across the country, employers and employees will likely have one burning question about whether or not the extra holiday is applicable to them.  We only have to cast our minds back to April 2011 when the same question was a hot topic surrounding the famous Royal Wedding.     

Bank holiday?

A bank holiday is one which is stipulated by legislation. The Banking and Financial Dealings Act 1971 governs bank holidays within the UK, and the Scotland Act 1998 assigns to the Scottish Ministers the responsibility for setting bank holidays. There are currently eight permanent bank holidays.

Public holiday?

Public holidays are controlled by individual local authorities. Generally, these are set in cooperation with local businesses and are aimed at preserving local history and traditions.  For example, in 2011 Dundee marked Victoria Day on 30^th May and Arbroath marked St Tammas day on 26^th July. These designated public holidays are merely recommendations: employers are under no obligation to close their businesses on these days.

Am I entitled to a holiday?

Employees are not automatically entitled to take a holiday on a bank or public holiday.  Rather, an employee must look to their contract of employment to establish the basis of their entitlement. An employee entitled to 20 days plus bank holidays would quite rightly expect the day off, as the Diamond Jubilee is indeed a bank holiday.

A more common example might be a contract entitling an employee to 24 days holiday in addition to six paid bank / public holidays. Such contracts usually go on to specify which six days will be given as holiday (Christmas Day, New Years Day and such like)! In that example, the employee therefore receives 30 days paid annual leave. As such, the employer would be compliant with the Working Time Regulations’ prescribed minimum of 28 days holiday.  The employee has no specific entitlement to take the Diamond Jubilee off as it is not one of the public holidays listed within the contract.

In relation to the Diamond Jubilee bank holiday, an employee in such a position would simply apply for a day’s holiday in the usual way, and an employer will then operate their usual procedures in deciding whether or not to grant the request. Employers must adopt a consistent approach to bank /public holidays. If employees have routinely been granted leave on such days in the past it may be that there is an established ‘custom and practice’ within the workplace. This could potentially allow employees to claim a holiday for the Diamond Jubilee.

The Practical Aspect

There is nothing intrinsically special about the Diamond Jubilee from an employment law perspective. Most employees are unlikely to be entitled to the day off, and will have to apply in the usual fashion if they wish to take the holiday.

If there is dubiety about an employee’s contractual entitlement, it may be that employers will choose to grant requests as a gesture of good will in order to maintain good employee relations. If this is done, employers should move quickly to tighten up their statement of terms and conditions in order to prevent a ‘custom and practice’ forming whereby employees expect to have an automatic entitlement to take future bank and public holidays off.

HMRC have updated their guidance on Employer-Supported Childcare to outline their interpretation of sections 35 and 36 and Schedule 8 of the Finance Act 2011 which came into force in July 2011.  The changes affect the tax reliefs available for Employer-Supported Childcare and are effective from 1 April 2011. 

The purpose of the change is to even out the amount of income tax savings available to all employees joining schemes regardless of the income tax rate that the individual pays.  The essential change is that anyone who joins an Employer-Supported Childcare scheme from 6 April 2011 will only get income tax relief at the basic rate.

However, if an employee was already a member of their employer’s scheme before 6th April 2011 and the employee’s circumstances have not changed, such employees will not be affected and will retain their current level of tax relief until:

• they leave their current employment (but excluding a change of employer which is outwith the employee’s control, such as a TUPE transfer); or
• they leave the employer’s childcare scheme; or
• they receive no employer-supported childcare for a continuous period exceeding 52 weeks; or
• their child no longer receives qualifying childcare; or
• they no longer have a child qualifying for the tax relief, for example, they are older than the upper age    limit specified.

Under the old rules, employer-supported childcare is tax-free for the first £55 per week at the employee’s marginal rate of tax.  Thus a 50% taxpayer would get relief at 50%.

The new rules provide for restrictions which target employees who pay income tax at 40% or 50%.  The effect of the restrictions will be to ensure that higher-paid employees do not receive more from the tax exemption than basic rate tax payers.  To achieve this, the weekly limits on the tax-exempt provision of childcare schemes will be:

- £55 for 20% taxpayers;

- £28 for 40% taxpayers; and

- £22 for 50% taxpayers.

Thus, a basic rate employee receiving vouchers worth £55 is entitled to tax relief amounting to £11.  The lower weekly limits for 40% and 50% taxpayers ensure that they also have tax relief of approximately £11 (40% of £28 = £11.20, 50% of £22 = £11).

With over one million families in the UK headed by lone parents and over 5.2million carers, requests for flexible working are likely to increase.  It is therefore extremely important for employers to familiarise themselves with the statutory procedure for dealing with flexible working requests so as to prevent any compensation being awarded by an employment tribunal. 

Flexible working arrangements have been held to include job sharing, part time working, flexi-time, working from home and annualised hours.

Parents of disabled children (aged up to 18), carers of adults and those who have shared parental responsibility for a child (aged up to 16) have the right to apply for such flexible working. 

An employer has a legal duty to consider such requests. 

What is the procedure for dealing with a request?

Within 28 days of receiving a request, an employer must either agree to the terms and notify the employee or arrange a meeting with the employee to discuss the request.  The employer should allow the employee to be accompanied by a work colleague if the employee so wishes.  Employees must be notified of the decision within 14 days of the meeting.  If an employer rejects a request, it must set out a clear business reasons for such a rejection.  Employees have a right to appeal this decision. 

What requires to be done if an agreement is reached and the request is granted?

If agreement to a change in working pattern is reached, the employer should put this in writing.  The law requires an employer to issue a new contract within one month of the change taking effect.  At the very least the employer should be providing a letter to the employee setting out the change and referring to the existing contract. 

What are the sanctions imposed on an employer?

An employee can make a complaint to a tribunal in relation to the right to request on the grounds that:

1. The employer failed to deal with the request in accordance with the time scales or by failing to hold a meeting, failing to notify a decision or failing to offer a right of appeal;
2. The employer refused the request for an unlawful reason; or
3. The decision to reject the application was based on incorrect material facts. 

The tribunal may order the employer to reconsider the application and may award compensation of up to 8 weeks pay to the employee.  It is relatively common for an employer to fail to meet the statutory time scales and, whenever there is such a failure, it is open to the employees to claim compensation from the employer as a result of this failure.  For this reason, it is very important that employers get the request procedures correct. 

What are the tips for dealing with flexible working requests from carers?

1. Train your managers to recognise flexible working requests and the time scales for dealing with such requests.
2. Create an internal application form which sets out the procedure and time scales and make it available to employees.
3. Ensure that a consistent approach is adopted when dealing with such requests.

In the current era of social networking with sites such as Facebook and Twitter being commonplace for many, employers are faced with potentially difficult decisions as to how such sites are tolerated within the workplace.  Imagine an employee made inappropriate comments directly to a client or customer of the employer.   Such conduct would likely be worthy of disciplinary action if not dismissal.  However, what if such comments were made using the forum of social networking sites?  The decision of the employment tribunal in Preece v JD Wetherspoons plc will be of interest to employers with similar questions.

A pub manager was dismissed for gross misconduct having made inappropriate negative comments on Facebook about two of her customers who had threatened her.   The tribunal held that in the circumstances the dismissal was fair.  The comments in question were made whilst the employee was at work.  The tribunal took the view that the comments seemed more like a joke between friends and it did not give any weight to the employee’s belief that her privacy settings meant that only her close friends could see the comments.  The tribunal found that a wider audience was able to view her entries, including relatives of the customers in question.  Accordingly, the manager was found to have breached the employer’s email and internet policy which specifically referred to the use of such sites during working hours.  The employer’s handbook specifically stated that gross misconduct would include breaches of this policy and conduct which affected employee or customer relations or brought the Wetherspoons’ name into disrepute.

The claimant employee argued that the dismissal was contrary to her right to freedom of expression under Article 10 of the European Convention on Human Rights.  However, the tribunal found that the employer’s action was justified in view of the risk of damage to its reputation.

The decision is likely to be of interest to both employers and employees.  Employers should take from the decision that if they want to deter employees from using sites such as Facebook during working hours or to make work related comments, a policy to that effect would be beneficial to form the basis for disciplinary action.  From an employee perspective, the decision should make employees think very carefully about making any work related comments on such sites or using them during work hours.

Jack Boyle
Trainee Solicitor